Investment Managers Arrested and Charged in $11 Million Investment and $8 Million Bank Fraud Schemes

Investment Managers Arrested and Charged in $11 Million Investment and $8 Million Bank Fraud Schemes

John R. Lakian and Diane W. Lamm have been charged in a five-count indictment alleging conspiracy to commit securities, wire and bank fraud, and two counts of substantive securities fraud in connection with schemes to defraud investors and banks of millions of dollars. The defendants will be arraigned later today at the federal courthouse in Brooklyn, New York.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York and Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).

According to the indictment, between February 2009 and July 2013, the defendants were involved in two schemes to steal investors’ money. In the first, the defendants obtained more than $11 million by promising investors that their money would be used to purchase, consolidate and sell registered investment advisory businesses. Instead of investing the money as promised, the defendants diverted a significant amount of it into their own pockets, to restaurant businesses they controlled, and to pay Lakian’s home mortgage. In the second scheme, the defendants perpetrated fraud through their management of the liquidation of a North Carolina-based investment fund with more than 100 investors. Instead of returning the fund’s proceeds to investors, Lakian and Lamm diverted investors’ money to themselves and to restaurant businesses they controlled. In addition, the indictment alleges a third scheme in which, between 2009 and 2012, Lakian and Lamm submitted fake tax returns, bank statements, and other false documents to banks in Brooklyn, Long Island, and elsewhere in applications to obtain more than $8 million in loans. These forged documents overstated Lakian’s income and assets by millions of dollars.

“As alleged, Lakian and Lamm preyed upon more than 100 investors, in multiple schemes, stealing their hard-earned money to use for their own purposes. They similarly disregarded the interests of lending institutions by submitting forged documents to banks in an attempt to fraudulently secure more than $8 million in loans” stated United States Attorney Lynch. “This Office will investigate and prosecute to the fullest extent those who victimize investors and commit financial fraud.”

“As charged, instead of carefully investing their clients’ money, one defendant paid off his mortgage, and in another instance the defendants diverted cash to a restaurant venture. They lied, cheated, and stole. This type of behavior is unacceptable. It’s also illegal. And it should be a stark reminder to anyone who is driven by greed. These insidious investment schemes will be identified and disrupted,” stated FBI Assistant Director-in-Charge Rodriguez.

The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty. If convicted, the defendants face a maximum sentence of 30 years’ imprisonment on the bank fraud count, 20 years on each of the securities fraud counts, and five years on the securities and wire fraud conspiracy counts. Additionally, if convicted, Lakian and Lamm may be fined up to $5 million for the securities fraud counts and $1 million for the bank fraud count.

The government’s case is being prosecuted by Assistant United States Attorney Whitman G.S. Knapp and Brian D. Morris.

This prosecution was the result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit http://www.StopFraud.gov.